This week's decision by Australia's high court to approve a libel lawsuit against an American Web site has once again raised fears that the Internet's widely touted freedom to publish may be at risk.

The lengthy opinion released on Tuesday said the Dow Jones news organization will have to defend a defamation lawsuit brought by a Melbourne, Australia, businessman in an Australian court.

Because Dow Jones, which published the allegedly libelous material on servers in New Jersey, is a multinational corporation with physical assets in Australia at risk, it has little choice but continue fighting the lawsuit in Victoria's Supreme Court. The company hoped to avoid that outcome because Australia's libel laws are more restrictive and less favorable to publishers than those in the U.S.

But the ruling may be far less chilling than many suspect, especially for individuals and small Web site operators with few assets and no significant business presence in countries with weak free-speech protections.

"The actual narrow legal issues involved are not terribly frightening," said Glenn Reynolds, a professor of law at the University of Tennessee. "It's a bad thing, not a horrible thing. What moves you to a horrible thing is that because the Australian high court has done this, it will be acceptable for countries with systems of law far less congenial to free speech to do the same thing."

According to Reynolds, the Australian decision could add a new wrinkle to efforts to control Web content in countries such as China and Saudi Arabia, where authorities have reportedly sought to block Net access to sites they deem inappropriate. With Tuesday's decision, these countries could be inspired to add local libel challenges to their store of censorship tools.

"Benighted Third World countries will do it thinking they won't be called benighted Third World countries," said Reynolds. "That's the danger."

Tuesday's decision comes as courts in the United States and around the world seek to define slippery issues of jurisdiction and Internet speech.

The Australian high court ruling is not the first to grapple with sovereignty in questions of liability for content published on the borderless Web. According to the Center for Democracy and Policy, a Washington, D.C.-based civil liberties watchdog, France, Germany and Italy in recent years have each asserted the right to regulate online content within their countries regardless of where that material is hosted.

In Germany, the Federal Court of Justice ruled in December 2000 that laws banning racial hatred apply to material that is accessible to German Internet users, even if it is created outside of Germany and stored on servers outside the country.

Also in December 2000, an Italian appellate court upheld a local court's jurisdiction in a libel case brought by an Italian citizen based on Web postings published on a site hosted outside of Italy.

U.S. a refuge?
In the United States, one of the most aggressive protectors of free speech in the world, Internet libel law is in flux.

The U.S. Supreme Court has ruled that publishers in one state can be sued in another. A 1984 ruling in a case called Keeton v. Hustler said the sex magazine Hustler could be sued for libel in New Hampshire even though its corporate offices were in Ohio. Another case decided the same year, Calder v. Jones, permitted a Florida resident to sue the California-based National Enquirer for libel.

Some established libel ground rules are now being revisited, however, thanks to new scenarios brought on by the Net. In a surprising reversal in June, the Minnesota Supreme Court vacated a judgment against a local resident who was sued in Alabama over statements made on an Internet chat board. The court overturned two lower court decisions, finding that the case should have been brought where the statement was produced.

Meanwhile, a federal appeals court is currently weighing jurisdiction in an Internet libel case brought by a Virginia resident against two Connecticut-based newspapers owned by the Tribune Company, headquartered in Chicago. A decision in the case, which could expand national liability for local newspapers, is pending.

On the question of international liability, U.S. companies with substantial assets overseas must as a practical matter conform to local laws where they operate, even when those laws offer substantially less protection for speech than the United States, legal experts advise. Still, U.S. courts have in general shielded publishers against enforcement of foreign judgments in the United States.

A case in point came in November 2001, when a federal judge ruled that Yahoo was not subject to liability in the United States from a lawsuit filed by French students over World War II memorabilia offered for auction on the company's U.S. site.

U.S. District Court Judge Jeremy Fogel wrote in his opinion: "Although France has the sovereign right to regulate what speech is permissible in France, this court may not enforce a foreign order that violates the protections of the United States Constitution by chilling protected speech that occurs simultaneously within our borders."

In other words, Fogel said the First Amendment's guarantee of free speech means nations that happen to be more censorial won't be able to enforce their judgments in the United States, a policy that would effectively shelter Web publishers who do not have assets or business operations outside the country.

No bulletproof shield
Because the U.S. Supreme Court has not ruled on this point, however, some risk still exists that publishers might find themselves on the hook.

"It's not clear that no U.S. court will enforce (such an order)," said the University of Tennessee's Reynolds. "The burden would be on me to show why it shouldn't be enforced. There's some authority for that under the Yahoo case, but there's not bulletproof authority."

In the Australian libel case, the court reasoned that jurisdiction turned on where the article, which appeared in Barron's magazine, was technically published.

"In the case of material on the World Wide Web, it is not available in comprehensible form until downloaded on to the computer of a person who has used a Web browser to pull the material from the Web server. It is where that person downloads the material that the damage to reputation may be done," the court wrote. "Ordinarily then, that will be the place where the tort of defamation is committed."

Dow Jones unsuccessfully argued that the Barron's article was published in New Jersey and mining magnate Joseph Gutnick should file his libel lawsuit there.

"There is nothing unique about multinational business, and it is in that that this appellant chooses to be engaged," the Australian court said. "If people wish to do business in, or indeed travel to, or live in, or utilize the infrastructure of different countries, they can hardly expect to be absolved from compliance with the laws of those countries. The fact that publication might occur everywhere does not mean that it occurs nowhere."

About the author

Declan McCullagh is the chief political correspondent for CNET. You can e-mail him or follow him on Twitter as declanm. Declan previously was a reporter for Time and the Washington bureau chief for Wired and wrote the Taking Liberties section and Other People's Money column for CBS News' Web site.
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